Activist investors shook up Canada’s clubby gold mining industry over the past two years by targeting boards at a dozen companies and winning an impressive number of battles. More campaigns are in the works, and even the largest mining companies may be vulnerable.
But can the activists deliver on the heightened expectations that come with their successful board fights?
It’s easy to understand why outsiders such as hedge fund Paulson & Co. Inc. get broad support when they target a laggard such as Detour Gold Corp. Detour’s stock, which hit $35 in the summer of 2016, plunged below the $10 mark last year amid a litany of problems at its flagship mine, northeast of Timmins, Ont.
That kind of story is too familiar in gold mining. Over the past 10 years, returns from Canadian gold company shares have trailed gold prices by a large margin. Shareholder services firm Kingsdale Advisors, a central player in a number of boardroom battles, published a report on the mood of the gold sector last week that said:
“We have heard shareholders complain – first privately and now increasingly publicly – about sustained poor performance vs. peers or the index; poor market guidance; project delays; capital overruns; inability to secure ‘routine’ permits and negotiate licenses; and excessive compensation.”
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